Short on staff, Nebraska taps analytics to spot tax evaders

Nebraska’s Department of Revenue is enlisting the help of analytics experts to identify residents who have neglected to file their taxes.

The Revenue Department contracted ASR Analytics, a Maryland-based firm, to hunt for residents who owe the state more than $5,000 in back taxes, the Associated Press reported Sunday. The software being used scouts through the department’s databases and adds extra scrutiny to those with higher than average incomes, those with IRS debt, past non-filers and out of state high-income earners.

The project was undertaken to comply with a 2014 law to increase tax collection accountability. The effort is further driven by the state’s need for funding. In October 2016, Gov. Pete Ricketts called for a hiring freeze to protect the state from dwindling revenues, and this year Ricketts made more than $56.5 million in budget cuts for additional savings. 

Nebraska State Tax Commissioner Tony Fulton said the state has a tax compliance staff of 30 employees that works to recover lost tax revenues. The team gathers about $23 million per year. Since the state’s hiring freeze is still in effect, Fulton said the hope is that analytics can make up the difference in the manpower his team could have had if it was able to hire more staff.

Stacey Parr, the Revenue Department’s director of compliance, told StateScoop in an email that the department initially began using analytics to stop fraudulent returns but quickly expanded its uses to help auditors detect other forms of fraudulent behavior. The results and reception by staff have been overwhelmingly positive.

“When you have a hiring freeze and you have less staff you have to be more efficient and these data analytics tools help us to be accomplish this,” Parr said. “Anytime you can see improvements like this, it’s always a positive.”

Apart from analytics, Nebraska’s legislature is considering a bill to recover additional sales tax revenues from online merchants. 

The bill would tighten enforcement gaps to the state’s current online tax code by asking online retailers for sales tax payments if their gross revenue from Nebraska sales amounts to $100,000 or more, or if financial transactions number 200 or more. 

Ricketts has dismissed the proposal as unconstitutional since a 1992 ruling by the Supreme Court found that states can only tax businesses with offices within state borders.